Highlights
Awkward imbalances are smoothing out this month for Empire State's manufacturing sample. The headline came in at 20.1 which tops Econoday's high estimate while the 6-month outlook, which plunged precipitously in April in initial reaction to import tariffs and talk of trade war, improved noticeably.

New orders have been very strong in this report and picked up the pace in May's report with a 7-point gain to 16.0. Unfilled orders did pile up a bit but, at 5.0, only at a modest pace which is good news for this sample considering signs that capacity is being stretched. But the news here is also good with problems in delivery times growing less severe and growth in the workweek, at 11.1, slowing nearly 7 points. Employment continues to grow but at 8.7 the pace appears sustainable.

The 6-month outlook rebounded nearly 13 points to 31.1 and, though it still remains 13 points below March, the gain suggests that the sample is adjusting to tariff disruptions, whether immediate or in their assessment of longer term effects. The factory sector was a main driver of the economy going into March's tariffs on steel and aluminum and this leadership, based at least on this report, seems to remain in place. Watch Thursday for Philly Fed's report on May.

Consensus Outlook
The Empire State index is expected to hold steady in May at a consensus 15.5 vs 15.8 in an April report that included visible slowing in new orders and backlog orders. Outlook readings in this report fell dramatically in April in what hinted at tariff concerns.

Definition
The New York Fed conducts this monthly survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 200 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.
Why Investors Care

The Empire State Manufacturing Survey has a much shorter history than the Philadelphia Fed's business outlook survey. The two series tend to move in tandem much of the time, although not each and every month. They are both considered leading indicators for the ISM manufacturing survey.Data Source: Haver Analytics